updated 1/28/2014 3:05:30 PM ET 2014-01-28T20:05:30

UP with STEVE KORNACKI
January 26, 2014

Guests: Jim McQueeny, Andrea Bernstein, Brian Murphy, Lynn Sweet, Frank
Pallone, Amanda Terkel, Katrina Vanden Heuvel, David Mello, Beth Mason, Jim
McQueeney, Frank Pallone, Andrea Bernstein, Paul Butler, Brian Wice


(BEGIN VIDEO CLIP)

STEVE KORNACKI, MSNBC ANCHOR: Welcome to Hoboken. Welcome to the north
end of Hoboken. We are standing in the middle of the three blocks that are
at the heart of this whole story involving the Christie administration and
Dawn Zimmer, the mayor of Hoboken. Mayor Zimmer basically says members of
the Christie administration say they would hold that Sandy aid unless she
approves the development deal. Do you believe her?

UNIDENTIFIED FEMALE: I do.

UNIDENTIFIED MALE: I don`t know why she would wait all this time to say
anything.

UNIDENTIFIED MALE: Of course she`s telling the truth. She`s not a
politician.

UNIDENTIFIED MALE: The Rockefeller Group owns this block. They own
another block around here and most of a third block. They want to develop
it into something big.

UNIDENTIFIED MALE: This is precious real estate for the city of Hoboken as
well as all of North Jersey.

KORNACKI: You could see the view of Manhattan, that`s the Hudson River and
New York City right on the other side. You can see why this is such
valuable land.

UNIDENTIFIED MALE: I`m hearing a lot of anger that there`s a possibility
that relief aid might have been tied to development.

KORNACKI: Do you believe her?

UNIDENTIFIED MALE: I guess someone is going to have to come down and prove
it. That`s what it`s going to boil down to.

(END VIDEO CLIP)

KORNACKI: Well, it was last weekend that Dawn Zimmer, the mayor of
Hoboken, New Jersey, sat on this set and leveled a serious allegation that
Chris Christie`s Lieutenant Governor, Kim Guadagno had pulled her aside at
a May 2013 event and explicitly linked her city`s level of Sandy aid to the
approval of a development project that is represented by the firm of one of
Christie`s top political allies. And that another top administration
official, Community Affairs Commissioner Richard Constable had delivered a
similar if less explicit message a few days later. By making those
allegations, Zimmer plunged herself and her city, a densely populated city
of 50,000 people with just one square mile into the national political
spotlight. And she created a serious political and legal headache for the
already embattled Christie administration.

Here is the chain of events that was set off by Mayor Zimmer`s appearance
on this show eight mornings ago. On Sunday, just over 24 hours after that
appearance, Dawn Zimmer met with officials at the office of the U.S.
Attorney for New Jersey. And according to the mayor the hastily arranged
meeting was at the request of federal prosecutors. And she shared with
them the story she told us on this show, and she also turned over her
personal diary which contains apparently contemporaneous accounts of her
interactions with Guadagno and Constable. Then on Monday, Guadagno made
her first and so far only public comment on the mayor`s accusations.

(BEGIN VIDEO CLIP)

LT. GOV. KIM GUADAGNO (R ) NEW JERSEY: In short, Mayor Zimmer`s version of
our conversation in May of 2013 is not only false, but is illogical and
does not withstand scrutiny when all of the facts are examined. Any
suggestion, any suggestion that Sandy funds were tied to the approval of
any project in New Jersey is completely false.

(END VIDEO CLIP)

KORNACKI: Zimmer then put out this response to Guadagno`s public
statement, "I am genuinely disappointed that Lieutenant Governor Guadagno
has lived up to her promise that she would deny linking Hoboken`s
application for Sandy hazard mitigation funding with expediting a private
development project." That same day on Monday, Christie administration
aggressively pushed back against the idea that Hoboken has received less
than its fair share of Sandy money. They argued that "Hoboken has in no
way lost out on relief funds." They noted that, quote, "Nearly $70 million
worth of funding for direct recovery and rebuilding efforts in Hoboken has
been received and approved. But that $70 million mainly involves funds
that went directly to individuals and businesses, mainly in the form of
flood insurance payments. It`s not money that Christie had direct
discretionary control over.

But then on Wednesday Zimmer, who appeared on several other national
broadcasts after her interview on this show, on Wednesday she announced
that at the request of the U.S. Attorney`s office she would have no further
public comments. In her statement she added that, quote, "I stand by my
previous statements and remain willing to testify under oath about all of
the facts in this case." By that same day, Wednesday, the FBI had made its
way to Hoboken.

Interviewing what NBC News`s Michael Isikoff reports are "at least five
witnesses who Zimmer told the FBI could confirm that she had previously
told them about the conversation she says she had with Lieutenant Governor
Kim Guadagno last May." One of those who Zimmer told is apparently the
City Councilman named David Mellow. An ally of Zimmer`s in Hoboken, Mellow
told "The New York times" that he remembers hearing from her last year
about, quote, "this quid pro quo ultimatum by the lieutenant governor."

Now Wednesday night the Hoboken city council held its first meeting after
Zimmer leveled her accusation. One member of the council, Beth Mason, who
is a leader of the opposition to Zimmer on the council and who ran against
her for mayor in 2009, asked her to attend to discuss the allegations. But
Zimmer didn`t show up. At this present time, she wrote in a memo to the
council it is best that I do not speak publicly about this matter any
further or do anything that might be perceived as interfering with or
jeopardizing the U.S. attorney`s work.

So that`s where we are now. The U.S. attorney`s office is on the case.
Mayor Zimmer is clamming up. We haven`t heard anything more from Kim
Guadagno nor have we heard Christie himself publicly rally to his
lieutenant governor`s defense. And the same debate is playing out across
New Jersey, and across the country. Is Dawn Zimmer telling the truth? Why
did she wait so long to come forward? Can anything be proven? That debate
is raging in Hoboken as well.

Here to talk about Hoboken and everything going on there right now, are two
people who know the woman and the city and the development deal at the
heart of all of this better than almost anyone. We have David Mello, he is
the Hoboken city councilman who says Zimmer told him about her conversation
with Guadagno last year and we have Beth Mason, the aforementioned
councilwoman who has been skeptical of Zimmer`s allegations. So, thanks
for joining us, both of you. I know it`s a long trip over here from
Hoboken to this side of the river. But I`ll start with you, David. Just -
we want to make things clear. You have been quoted publicly this week
saying you had some kind of conversation about some kind of quid pro quo
ultimatum from lieutenant governor to Kim Guadagno to Mayor Zimmer. And
either status right now, as you are waiting to talk to the U.S. attorney
and you don`t want to talk about that any further.

DAVID MELLO, HOBOKEN CITY COUNCIL: Absolutely. I stand by the statements
I`ve made to the press, but to - I think it would compromise the
investigation of the U.S. attorney to rehash those statements I`ve made
with the press. I am eager, though, to share that information with the
U.S. attorney and I will be doing so this week.

KORNACKI: OK. And, Beth, you invited the mayor to speak this week at a
council meeting. She didn`t show up. I`ve seen some skeptical quotes from
you about the story she is telling. Can you explain your reaction to what
she is alleging?

BETH MASON, HOBOKEN CITY COUNCIL: Sure, I wouldn`t necessarily say they`re
skeptical. I think that the citizens of Hoboken, of whom I represent and
Councilman Mello represents, deserve the right to know. They deserve the
knowledge to hear from their mayor directly. They also - the
councilmembers themselves deserve the right to know what`s going on. It
seems that some council people know some information while the rest of us
are kept in the dark. The city council is the oversight body for the city
of Hoboken and for this redevelopment area. And to have us be in the dark
for 250 -- more than 250 days is like I just find that unacceptable.

KORNACKI: So, what is the - with the U.S. Attorney`s office there, with
the FBI agents in Hoboken, I think now looking around and trying to get to
the bottom of this, what do you think the proper course of action is for
the mayor? I mean she`s made the allegation, she`s now going to the U.S.
Attorney. They`ve asked her to be quiet and they are clearly looking into
this. What is the proper steps you should take?

MASON: Well, first of all, they`ve not told us to be quiet. We`ve not
gotten - heard from the U.S. Attorney or the FBI at all. We`ve gotten no
letter from the city attorney. We`ve heard nothing other than statements
that have been made. The public still has the right to know and we as the
oversight body just like the state legislature has the right to ask for
people to come before them and ask them questions about what actually
transpired. Especially when there`s a project that`s on our docket at the
moment. If these allegations are true, which are serious. They`re very
serious and I, you know, I`m concerned for our city if that`s -- these are
allegations are true. Because we have a number of development projects in
our town. If that`s on our docket now, we need to know that. We need to
know and the citizens had a right to know that before the election. 250
days in between that was actually an election that took place. You know,
our governor was on the ballot and the mayor was on the ballot and, you
know, it could have potentially changed the direction of that election.

KORNACKI: Well, so let`s talk about that project and its role in Hoboken.
We`re talking about this Rockefeller Group project. We just showed you
some video from the site right there. Tell us from a Hoboken standpoint,
how big a deal has this been in town? What does this potential development
mean to the town? Has this really been a driving force in local politics?

MELLO: Well, it is a very big deal and there are a number of projects in
Hoboken, not just this project that`s being proposed by the Rockefeller
Group in northern Hoboken. In southern Hoboken we have New Jersey transit
as proposing building a tremendous amount of construction. What I want for
the citizens of Hoboken is that their quality of life, what they need is
taken into consideration when all of these projects are working their way
through the legal process. There`s a redevelopment process in the state of
New Jersey. And it has to be followed. So we cannot talk to the
Rockefeller Group before we`ve made a designation. We very recently made a
designation of that area, in which their property is contained, as an area
in need of rehabilitation. Now the next proper step is to hire a planner
and start planning out that area, taking into consideration first and
foremost the needs of Hoboken. It shouldn`t be anything where a governor
of the state of New Jersey has been trying to impose his will on the
project. So if that happened, if that was what went on with Sandy funding,
I want that investigated for the citizens of Hoboken and I also want to
continue to advocate that the citizens of Hoboken get the Sandy funding we
need so we can be a resilient community.

KORNACKI: But what about that question of Sandy? I want to get this in.
Because the Associated Press last night, there`s been a lot of talk. The
Christie people have been pushing back saying actually Hoboken did not get
a raw deal in Sandy funding. We took it through a little bit of their
numbers in the interview. The Associated Press was reporting last night
basically saying Hoboken has received - it`s been New Jersey town, the
state awarded $25 million for energy projects to help deal with outages.
Hoboken received $142,000. The same amount as 39 other recipients. State
also provided money to communities hit by the storm to hire experts and
come up with long-term recovery plans. Hoboken`s $200,000 grant was the
fourth highest allocation among the 35 local governments in the program.
Beth, do you buy what the governor`s office is saying? Do you think this
story has it right? Did Hoboken get what it deserves or do you share the
mayor`s view that Hoboken needs a lot more to be prepared for the next
storm?

MASON: I represent the city of Hoboken. I like to have as much money as
our town can possibly get in. And, you know, I would work with the mayor.
I will work with councilman and I`ve said that at the council meeting that
we will work - we should work all together to get as much allocation as we
possibly can for our citizens. The issue here is more about under what
context that is happening in, and if the councilman knew back in the summer
that this was going on, why was that not brought to the council? Why were
we not told? He`s trained as an attorney? What did he tell the mayor and
how to respond to that? So these are questions that I think the public has
a right to know especially given there were decisions made in the interim
in that time frame that were, you know, the citizens of Hoboken made a
decision to make a vote to do.

MELLO: Steve, you know, the mayor has gone on in the press in the past
week and made very clear why she didn`t come forward earlier. And to talk
about it any further from my standpoint, I want to have those discussions
with the U.S. Attorney`s office so that they can give this matter the
investigation it deserves. But getting back to what you were talking about
the funding, you know, we did receive when it came to the energy
allocations the same amount of funding as many other municipalities
including Upper Saddle River. We received the same amount of funding as
them. I don`t think that`s fully appropriate. Because I`ve worked in
Upper Saddle River when I was going to law school in the summer. It is
much further upland. It is way far away from the coast and it`s not
dealing with the same situation. It`s not about whether Hoboken received
equitable treatment.

It`s about whether Hoboken received treatment that it deserves given its
proximity to the Hudson River and given the flooding that we experienced.
A more important issue is the hazard mitigation grant program. This was a
$100 million that was - it was crafted so that to be eligible for it, you
had to have a shore home. Now my parents have had a shore home on Long
Beach Island since the `80s. I`ve been going there since the `70s. I was
delighted that the state is providing money to residents up to $30,000 to
raise their homes. A lot of people have not raised their homes,
particularly if they were built prior to the `80s when that was put into
local ordinances and that money is needed. What I would have liked to have
seen, was for that funding to be also crafted so that if you would live in
an urban municipality like Hoboken and you were decimated by this flooding,
which we were, ground level apartments, basement level apartments, they
can`t put themselves up on stilts. They can`t bring in the contractors and
put their building up on jacks. They often own a very expensive
condominium which has condominiums above it which weren`t affected by the
storm in the same way.

KORNACKI: Right.

MELLO: We would have liked to have seen the utilities, things like that be
able to be raised. And for this funding source to be something that would
have given our residents an ability to apply for the grant.

KORNACKI: It strikes me that this argument about the funding level that
Hoboken received is central to this and it`s also completely beside the
point. And it`s central to it because you can make the argument you just
made that the way the entire program was structured at the statewide level
that a city like Hoboken, the unique circumstances of a mile square city on
the banks of the Hudson River that was 80 percent under water, you are not
going to be eligible under the criteria the state has set up for most of
the aid. It`s going to go to short towns, it`s going to go to land buyback
programs, things like that. So, that`s, I think, a totally relevant and
valid argument to make. At the same time it`s also beside the point
because the allegation that the mayor has made is, look, I don`t think my
city got enough. That`s what she sat here saying. And she has publicly
said that, I don`t think my city got enough and she`s saying the response
she got from the administration wasn`t, yeah, you did get enough. The
response she is saying she got from the administration is, well, if you
want more you need to expedite the project. And that`s the question that
the U.S. Attorney is now looking at and that`s what she is going and
talking about. Anyway, we are out of time here. I`m sorry. But my thanks
to Hoboken City Council members David Mello and Beth Mason. We appreciate
you taking a few minutes this morning.

We talked about the woman making the explosive accusations involving the
Christie administration in the city of Hoboken. What about the woman she
made those allegations against? We`re going to be talking about Lieutenant
Governor Kim Guadagno. That is next.

(COMMERCIAL BREAK)

KORNACKI: Until last weekend at this time during this very show most
people had never heard of New Jersey Lieutenant Governor Kim Guadagno.
It`s fairly safe to say that most people in the state of New Jersey had
never heard of Kim Guadagno, which may or may not have anything to do with
the fact that until just a few years ago New Jersey had never had a
lieutenant governor at all. The job was created by voters in 2005. That`s
when ballot initiative number one passed with 55 percent of the vote. It
was on the ballot that year because of this man, Jim McGreevey. When he
resigned the previous year in 2004, the state constitution called for him
to be succeeded by the Senate President, Richard Codey.

But that was the second time in three years, actually, that something like
this had happened and the second time it involved Dick Codey. Because when
Christine Todd Whitman resigned in 2001 to join the Bush administration the
New Jersey constitution mandated that the Senate president would become the
acting governor while keeping his job as senate president making that
hyphenate governor-senate president absurdly powerful and (inaudible) in
the world of New Jersey state politics. It was also really awkward. Five
different people filled the role in the year after Whitman left office as
governor, most of them in just the last week.

Look at it this way. Donald DiFrancesco held the job for most of the time.
But his term as Senate president ended just before Whitman`s unexpired
gubernatorial term, which meant that Attorney General John Farmer was put
in the job of governor for a whopping 90 minutes and it was during those 90
minutes that the newly reorganized state senate, which was split evenly
along party lines elected its leaders, which then meant that the new
Republican co-president of the state senate John Bennett and, yes, the new
Democratic co-president of the state senate Richard Codey split up the
remaining week until McGreevey was finally sworn in as governor. It took
those Senate president serving for three and a half days. And so, if you
are keeping score to home, that was five governors in eight days. It was
all just a little nuts.

So, that is some of the zaniness. That led to the creation of lieutenant
governor`s job in 2005, and that meant that the next time New Jersey held a
statewide election in 2009, it wasn`t just Chris Christie who was sent to
Trenton as governor. Kim Guadagno went with him as New Jersey`s first duly
elected lieutenant governor. She`s largely remained the figure in the
background ever since, at least until this week. So who is Kim Guadagno
exactly?

Well, a little background here. She was born in Iowa, but she spent a bulk
of her career here, in the New York area. She was a federal prosecutor in
Brooklyn. And when she moved to New Jersey, she became an assistant U.S.
Attorney in Newark. This was before Chris Christie had the top job in that
office. She left to teach law for a while, and then local politics in
Monmouth County on the shore. She was on the planning board, and then she
was a borough commissioner, and in 2007, she was elected to the position of
sheriff of the county. And from there she was picked by Christie to run
with her in 2009 and she became the lieutenant governor. One of the
biggest names in news this week, one we are likely to keep hearing about,
and someone that most people, it`s safe to say, have been very unfamiliar
with at least until now.

To talk a little bit more about her find out a little bit more about her.
I want to bring in this morning`s panel. We have Jim McQueeney, who is the
chief of staff and spokesman for Senator Frank Lautenberg. Now, a public
affairs strategist. Who also hosts a weekly New Jersey politics show on
WORTV. Also, Jim McQueeney and I co-host the show together every three
years on News 12 in New Jersey. As my first taste of television. Picture
that one. I always appreciated it.

But also, joining us we have Democratic Congressman from the Garden State
Frank Pallone. We have Andrea Bernstein, she`s metro editor with WNYC news
radio and Brian Murphy who was reporter covering New Jersey politics for
years and is now a professor at Baruch College. So thanks, everybody, for
joining us. This question of all the world knows of Kim Guadagno is about
25 seconds of a very stilted, scripted statement that she read on Monday
and everybody has been trying to dissect it and analyze it since then.
Jim, we`ll start with you. Just what should people know about Kim
Guadagno?

JIM MCQUEENEY, FMR. SEN. LAUTENBERG CHIEF OF STAFF: Well, first of all,
it`s a little troubling because the thought that the governor`s office, if
they did, sent up as a hardball a messenger up the turnpike to Hoboken to
deliver that message is - it`s somewhat implausible and here is why. What
has she been for the last four years? Well, actually she`s been a rotary
and Kiwanis lunch speaker and she has cut ribbons for the last four years.
And the other thing is, she`s really not somebody - I don`t mean that in a
demeaning way. She is quite popular. She gives out her cell phone number
to everybody she sees. (inaudible) said that she`s probably have enough
calls already, right, on this thing? But, you know, looking at somebody
here who is not politically really connected as much as she portrays
herself to the governor`s office. Not because of her, but because of the
governor`s office. They don`t want that moon clouding their sun on this
thing here. And there were a lot of complaints even by her in the
beginning part until she saw the way it was going to really roll that I
would like a greater involvement on here. And you hear this from a lot of
her former staff, people who work with her and the like and generally in
Trenton.

So, when you see someone who has just been doing that on the road, the
salesman for the administration, it`s not really the type of typical
messenger that`s ever sent to deliver a hardball message like this. That
is a problem to sort of stretch to cover to believe.

KORNACKI: But she is part of her portfolio that isn`t dealing with
economic development questions. Right, so the idea -- and she seemed to
say in that statement, she seemed to say that there was a conversation.
She had some kind of conversation with Mayor Zimmer that involved
development and obviously the big development project. It doesn`t seem a
stretch to think that if she was in Hoboken and talking development that
this Rockefeller project came up.

MCQUEENEY: Well, of course .

KORNACKI: And we know that the mayor was very much on the case of getting
Sandy money. So some of the basic ingredients you can see .

MCQUEENEY: See, that is the issue here. I mean Guadagno went up and she
went up to do her job. That`s her economic portfolio on there. She has
been the salesman for the administration for four years on this thing,
right? So, OK, given. That she has to do as part of her job. The
connection to the part is a little troubling because neither she is that
political enough to deliver it. She was a former prosecutor. She had to
realize that you never connect it to on here and she was dealing with a
mayor who isn`t actually politically sophisticated as people might believe
here. There is a lot of room, and I don`t mean to be the defender for the
people involved here, but there is a lot of room for the lack of a connect
on here. And, you know, Guadagno goes up here and, you know, talks about
what needs to get done. I`m sure the conversation went from the other
side, the connect by - from Hoboken mayor to maybe what about Sandy money.
That`s the problem. How would it think? Because typically when people
come up to express the governor`s will and, by the way, there would be a
very long line through a long line of history in New Jersey about people
saying, hey, the governor would like this and if it`s not offered up,
people will ask. The position is so powerful in the state. Well, where is
the governor on this? It was inevitable that that would come up in some
way, in some fashion. Because that`s the way it works in New Jersey.

KORNACKI: Look, congressman, you represent Monmouth County. You - she`s
from your home turf politically. What do you make of Kim Guadagno?

REP. FRANK PALLONE, (D) NEW JERSEY: Well, as you said, I mean she`s been
the sheriff of Monmouth County, she was a commissioner, which is like a
councilman in Monmouth Beach, which I represent and I know it fairly well.
But I mean the one thing I may disagree with Jim on is this. I mean Kim
Guadagno from the very beginning was very much involved in the Sandy. In
other words she was always there. She was out, you know, talking to people
about Sandy relief. It`s also true that as you know with the lieutenant
governor there is no specific portfolio other than what the governor gives
her and in this case he did have her responsible, if you will, for economic
development. So she would go around and try to promote economic
development, you know, tax packages, tax breaks, that type of thing. So it
is very likely that she would be talking about both of these things. I
mean I wasn`t there so I don`t know whether she linked them or not. But
you know, to be honest, I don`t know why Dawn Zimmer would lie. I mean she
has no incentive to lie. I mean she is basically putting her whole career
on the line here. So, you know, it`s a very serious charge that she made.
And, you know, I was here on your show when she actually made them and I
thought she was very credible in the way she had her diary and she had
talked to other councilmen about it at the time. So, I would not dismiss
this. This is a very serious charge.

KORNACKI: Yeah, and, Andrea, I mean it seems like - I`ve heard the
argument put to me by a number of people that there may be - you know, we
think the things in black and white and there may be some gray here, that
maybe that Dawn Zimmer thought she was saying and hearing one thing and Kim
Guadagno thought she was saying and hearing another thing. But at the same
time, there are some basic elements here that I think that potentially
could be resolved. And that was - Maybe Kim Guadagno was, in her mind, an
artful way trying to say, hey, we could help you out with Sandy, but you
have got to help us out on this and there`s that quote that Zimmer
attributes to her like, you know, I`ll deny it if you ever say this. I
know this isn`t right. But it almost sounds like there could be a context
there where she was trying to be, in her mind, helpful. But ultimately,
even if she`s trying to be artful about it, if she is ultimately artfully
linking Sandy funding and the Rockefeller project, that`s a big deal.

ANDREA BERNSTEIN, WNYC NEWS RADIO: Well, it is a big deal. And we don`t
know what happened here. We don`t have this treasure trove of emails like
we do with the bridge case, but one of the things we do know from the
email, the 2,000 pages that we`ve read, is that there were linkages like
this made in the Christie administration. We don`t know what happened in
this instance, but we know that happened. And one of the things I was very
surprised about when I read the emails is just how much of this was written
down. I would have thought there would have been a lot of winks and nudges
and elbows and "You understand what I`m saying." And so, that to me was
surprising. Now, we don`t have that here. We don`t have the emails. We
just have the diary, we have the witnesses. But we don`t have an explicit
thing written down that we know of yet.

KORNACKI: Right. Yet is the key question. And we`ll pick up how we might
figure out a little bit more, and we`ll get right after this.

(COMMERCIAL BREAK)

(BEGIN VIDEO CLIP)

KIM GUADAGNO, CANDIDATE FOR LT. GOV: When we get to Trenton in January,
Chris and I, we are going to start with the - start with the bottom of the
budget and work our way up. You`re going to send two former federal
corruption prosecutors to Trenton.

(APPLAUSE)

GUADAGNO: We`re going to turn the lights on and turnover every rock until
we find every dollar of wasteful spending.

(END VIDEO CLIP)

KORNACKI: So, that was Kim Guadagno in 2009, at lieutenant governor`s
debate. Trivia question, who was her opponent that year? It was Loretta
Weinberg. You`ve probably seen her on this network quite a bit the last
few weeks, but anyway, that was her campaigning in 2009. And Brian, she
plays that former federal prosecutor card there. That was one of the
calling cards of the Christi - Guadagno campaign in 2009. It`s one of the
defenses you hear right now of, you know, maybe this didn`t happen because
as a former federal prosecutor she would have been smart enough not to make
this kind of explicit linkage that Mayor Zimmer is alleging.

BRIAN MURPHY, BARUCH COLLEGE: Right. And that`s the story we keep
hearing, right? And there are so many people who are former federal
prosecutors in the administration, right, the line has been, well, they
couldn`t have done this. They are all attorneys. They are all
prosecutors. They should all know better. The problem - I think that the
question on mind is what`s the chain of custody on the issue of the
Rockefeller group property? Like how did that get into the conversation?
I could see her portfolio being economic development and the fact that she
gives out her cell phone number and, you know, there`s a Hunter Walker`s
piece in "Talking Points Memo" or a little profile of her. The state
senator says, you know, businesses can call her. So, she`s a pipeline. I
mean she may not have this big role, but behind the scenes people
understand that she is a pipeline to the governor. So if she`s there and
talking development, how did Rockefeller get into the mix? How did Sandy
get into the mix? And I can understand how we might think that Dawn Zimmer
just wasn`t sophisticated enough to understand the way things are done in
Jersey except when you shine a spotlight on that you end up getting -
right, when prosecutors get interested in that common place way of doing
business, suddenly there`s an indictment.

KORNACKI: And the problematic thing here, I think the especially
problematic thing when you look at her from Guadagno standpoint, from the
administration`s standpoint is, you have - you could make an argument from
the administration`s standpoint, as Rockefeller project in Hoboken that the
administration in the name of economic development would have an interest
in. OK. This could be a commercial office tower. This could be jobs.
This could be taxes. This could be a good thing. It would be in the
interests of the administration to push this. You could certainly make
that argument. But you`ve got this added piece that we`ve now established
where you have the chairman of the Port Authority, his name is popping up
on these emails from his own law firm. He`s being copied on them. People
in his law firm are trying to set up teleconferences with him and city
officials in Hoboken to push for this project. So now it`s not just the
Christie administration and the abstract has an interest in pushing
economic development, an office tower in Hoboken if that`s the case. It`s
they`d be pushing for a project that one of Christie`s top political allies
has a vested economic interest in.

MCQUEENY: So, that`s an issue to be resolved, really. As it goes further.
Because it is troublesome. But one other thing at the top of your show
today you showed -- you were interviewing residents in Hoboken. And what
you saw, the division of opinion there, is really what`s going to be - this
thing is going to rest on, they rest on the judgment. Let`s say there`s a
criminal complaint for - or something like that. OK, there`s a jury for
that. That`s the rule of law and the court of law. But this is really
something that`s in the court of public opinion. You saw the division of
the people you talked to. It almost -- well, certainly, it does matter if
anything is criminal. But this is really a political thing with basically
a court of public opinion being the judge and juror on this. And that is
the thing that`s probably going to be more near term problematical for
everyone involved.

KORNACKI: And right now, it seems like, look, we have gotten from Dawn
Zimmer on this show, she shared her diary on this show. She shared a very
vivid account of what she says happened. And right now if you are talking
about the court of public opinion, you have that on the other side. You
just have Kim Guadagno`s very brief, did not take questions from the press,
didn`t offer, OK, she got her conversation wrong. This is what our
conversation actually was. She hasn`t shared anything like that. I
haven`t seen any polling on this but, congressman, I sense at this moment
that Dawn Zimmer`s version of this might be a little more resonant with
people.

PALLONE: I think so, only because, as you said, she had the diary. She
talked to other councilmen and other people at the time. The other thing,
too, as she mentioned last week, you know, the Rockefeller group was only
one part of a larger development project and for whatever reason the Port
Authority kept, you know, honing in on the Rockefeller Group, the
Rockefeller Group in their study, whatever. And, you know, she kept
wondering why isn`t everything else being mentioned here? Why are you not
worried about development in that same area that`s not part of the
Rockefeller group. So, you know, there is that Port Authority emphasis on
the Rockefeller group that she pointed out and all of this makes it very
credible particularly what is her motivation? She has no reason to lie
really.

KORNACKI: Yeah, go ahead.

BERNSTEIN: It`s a worth emphasizing that study was funded by the Port
Authority and the funding was granted just as David Samson was taking over
at the Port Authority. So, you know, I talked to a lot of experts in the
past week and they thought that that was just an apparent conflict of
interest, that he is the chairman of this giant $7 billion authority and
it`s funding a project, which directly benefits a client of his. The study
that they came up with. But the thumb is on the scale. They said all
these other pieces of property owned by all these other developers, no.

The one .

KORNACKI: Only three blocks out of 19 get that designation, right.

BERNSTEIN: That`s right. That`s prevented by Wolff Samson, which is David
Samson`s firm, which has done tremendously well under Chris Christie.
That`s the one that should get it. And there is no record that we`ve seen,
and I reached out to them, I read chapter of the Port Authority that there
was any attempt to recuse himself, to get out of the deal. So, no one has
seen anything .

(CROSSTALK)

KORNACKI: Right. It`s that whole chain.

BERNSTEIN: Right.

KORNACKI: It`s the whole chain of state officials putting the city of
Hoboken in touch with the Port Authority to get the money. Then, it`s
David Samson`s law firm leaning on the city over this. And, of course, it
turns out this is a two-year process. That by the end of this, the state
official who originally put Hoboken in touch with the Port Authority, by
the end of this two-year process, she`s working for David Samson`s law firm
and she`s pushing to get David Samson`s meetings with her.

BERNSTEIN: Right.

KORNACKI: Again, I don`t know illegal but boy, it looks bad, it looks like
the worst of New Jersey. Anyway, if you are Chris Christie, who should you
be more scared of right now? Someone like Dawn Zimmer and her serious
allegation or someone like Bridget Kelly, his former staffer who just got a
very serious defense attorney. The legal side of all this is coming up
next.

(COMMERCIAL BREAK)

KORNACKI: This week, we saw another Republican Governor, Virginia`s former
governor Bob McDonnell and his wife Maureen McDonnell both indicted by the
federal government in a scandal that engulfed the final year of his term.
McDonnell insists that he didn`t break any laws.

(BEGIN VIDEO CLIP)

FMR. GOVERNOR BOB MCDONNELL (R ) VIRGINIA: I will use every available
resource and advocate that I have for as long as it takes to fight and
prevail against these false allegations and the unjust overreach of the
federal government.

(END VIDEO CLIP)

KORNACKI: As we know now McDonnell is no longer the only Republican who
has to worry about the U.S. Attorney`s office. We`ll talk with both a
former federal prosecutor and a defense attorney about what Chris Christie
might face from investigators and what obstacles the government could face
while they investigate him.

(COMMERCIAL BREAK)

KORNACKI: Governor Chris Christie has tried to make this past week go by
as quietly and quickly as possible. But there is no wishing the two
scandals swirling around him away. Not when the U.S. Attorney for New
Jersey Paul Fischman is involved issuing subpoenas to both Christie`s
campaign and the state Republican Party this week expanding the scope of
the Fed`s interest to include not just the Hoboken allegations, but also
the George Washington Bridge episode. The subpoenas are on top of the 20
already issued by a special state legislative committee investigating the
bridge scandal. Christie campaign has now hired high-profile legal counsel
from the top tier Washington based firm of Patton Boggs, from Chris
Christie has hired before.

More on that in our next hour with Robert Luskin helping lead the legal
team. Luskin is famous for defending a wide range of clients including
Karl Rove and Lance Armstrong. And has worked on the government side.
Remember add scam? Sure, you do. That`s the scam that has now been turned
into a movie called "American Hustle." In the statement released on
Thursday, Luskin said, "All three subpoenas focus on the closure of lanes
on the George Washington Bridge. The campaign in the state party intend to
cooperate with the U.S. Attorney`s office and the state legislative
committee. And we will respond to the subpoenas accordingly." What about
those other allegations by Hoboken Mayor Dawn Zimmer? Zimmer is offering
her word and her diary, but how do you prove something like that to the
U.S. Attorney?

I want to bring in former federal prosecutor Paul Butler who at the
Department of Justice specialized in public corruption and while there, was
part of the team that indicted Senator David Durenberger in the 1990s.
He`s now professor of Georgetown University. And we have criminal defense
attorney Brian Wice, who`s successfully worked to overturn the money
laundering conviction of former Republican House Majority Leader Tom DeLay.
Welcome to, both of you. Welcome back to both of you. We had you on
satellite last week. Now, we`ve got you at the desk. So you can eat
pastries.

(LAUGHTER)

KORNACKI: That`s the perk of this. But Paul, I`ll start with you as a
prosecutor, as a former prosecutor. If you were presented with what Dawn
Zimmer has presented the U.S. Attorney`s office with, the account she has
shared in the show, apparently contemporaneous diary entries and now we are
told, you know, a couple of people, maybe four or five people in Hoboken
who she says and who will vouch for her, say, told her about this at the
time and you have the denial we heard from Kim Guadagno, how would you go
about pursuing that case proving that this happened?

PAUL BUTLER, FMR. FEDERAL PROSECUTOR: And so, this is the most significant
development in the case so far. She drops this bombshell on your show last
Saturday and Sunday, the next day, the federal prosecutors bring her into
the office and they ask, you know, what do you know? Do you have any
documents? We believe you. We want to believe you. We want to know
what`s up. But, you know, what else do you have? So, she - I told a bunch
of other people about this at the same time. So, they interview those guys
and apparently, they corroborate the story. But again, this is all just
one witness. So, what they`re looking for now is - are there other
witnesses. If you`re a bad guy, if you are a bully, it`s usually not just
a bad guy or a bully with one person. You usually do that with a bunch of
other people as well. So, they get other people who can tell a story like
this and finally, Steve, you know, it`s always about follow the money.
Because at the end of the day, this is a story about the governor`s boy is
a lawyer for this development group so if the development group gets the
contract and the governor`s boy gets good thing, but what about the
governor himself? Because let`s face it, he`s who the U.S. Attorney has
his focus on. So they really want to follow the money and see if there`s
some connection to Governor Christie because he`s the big fish in this
investigation.

KORNACKI: Well, also, if you were - Brian, if you were looking at, let`s
say, Kim Guadagno was your client right now, who has been right now the
allegation centers on did she go to Hoboken and make this threat to the
mayor, given what the mayor has now produced - I would say in the court of
public opinion, the mayor is coming across better if only because the
lieutenant governor hasn`t only said anything and what she said was this
sort of stilted, you know, reading from a script thing. What would you be
advising from a legal standpoint to Kim Guadagno now? Is it - you`ve got
to go out there and you`ve got to tell your version of this or is it just
keep quiet? How does she come back against what the mayor is alleging?

BRIAN WICE, CRIMINAL DEFENSE ATTORNEY: Steve, she walks a very fine line
between trying to regain support, as you said, in the court of public
opinion. It`s not just what the U.S. Attorney`s office is going to want,
you know. It`s what the citizenry of the Garden State wants to hear on the
air at 4, 5, 6 and 10 in Saturday and Sunday, watching this broadcast. But
I think what she`s got to do is stay on point.

One of the lessons I learned in the Tom DeLay case is the criminalization
of politics is a very unfair process. There is a fine line between
fastballs and bean balls. And look, particularly, nobody knows it better
than you do, Jersey politics, it`s like government intelligence and jumbo
shrimp. It`s a tough way to make a living and there`s nothing inherently
wrong about playing hardball. The lieutenant governor has to get out there
and say, look, I`m doing my job for the people who elected me and I crossed
no lines. And by the way, why did it take the mayor as long as it did for
her to make it (inaudible)?

KORNACKI: From a legal standpoint, though, there`s hardball and everything
but if it`s established that there was basically a quid pro quo of Sandy
funds for approval of a development project, there`s a serious legal
question there, right?

WICE: There`s a serious legal question, Steve, but it doesn`t necessarily
mean somebody ought to be indicted. If it`s nothing more than political
quid pro quo, in the context of Garden State politics, hey, no harm, no
foul. It`s only if that quid pro quo crossed the line from legality into
illegality, and that`s why everybody is here today.

KORNACKI: We will pick it up with Paul after this. Let`s take a quick
break.

(COMMERCIAL BREAK)

KORNACKI: So Brian was making a point earlier that from a legal
standpoint, there may be a distinction between a quid pro quo that is
politics as usual, especially in New Jersey, and something that is actually
illegal. And (inaudible).

BUTLER: Its` true. This side you have political pressure, rough and tumble
politics, which in some ways we don`t mind. That`s actually how the Civil
Rights Act of `64 got accomplished, by horse trading and by threats by LBJ.
So that`s okay to a degree. Over here we have extortion, which is a crime.
There`s this big gray area in between. The scariest two words for Governor
Christie are Rod Blagojevich, because his defense was, well, this was just
politics as usual. I do you, you do me. Where is he now? In federal
prison.

KORNACKI: The other question is that some of the news this week was about
Bridget Kelly, the former deputy chief of staff to Chris Christie, the one
who wrote the time for some traffic e-mail. He threw her overboard right
away, called her a liar like five times on national TV. She switched
lawyers this week and hired Michael Crichley (ph), who is the top -- one of
the top defense attorneys in New Jersey, so it`s changed a lot of talk
about what she might be looking for. You have David Wildstein, who is one
of the appointees at the Port Authority, who`s since resigned, who is
openly looking, it seems, for some kind of an immunity deal. Brian, I
wonder from your standpoint as a defense attorney, if you have a client in
one of their positions, how do you go -- what is the art of pursuing a deal
with the feds? What goes into that?

WICE: I think everybody understands whoever watched "Law and Order" that
the first guy or gal in the courthouse inevitably gets the best deal. But
unless and until as a lawyer you think your client is in serious legal
jeopardy, you don`t want to play that hole card. But if and when you
believe that your guy or gal is in serious legal difficulty, you make the
call. You sit down and you offer them what they think they need. But in a
situation like this, these are top flight criminal lawyers, and I think we
made that point last week. The guys who had been involved in this case,
they are the legal pro bowl. They ought to move venue to Hawaii next week
with the all stars. Only if you believe your client is looking at orange
as the new black do you finally sit down and try to cut a deal. It`s
defcon one. Believe me.

KORNACKI: From a prosecutor standpoint --

BUTLER: You have all the power as a prosecutor. The ball is in your
court. You can haul her into the grand jury. You can ask her. She can
take the fifth and then you put FBI agents on her to investigate everything
she has ever done in her life, you find out something she has done illegal.
Everyone has. Then you say I`m going to throw the book at you unless you
cooperate. If she`s got the goods, they`re going to get them from her.

KORNACKI: You ID your target as a prosecutor and then you make it worth
their while to cut the deal. We have too little time here, but I want to
say thanks to former prosecutor Paul Butler and criminal defense attorney
Brian Wice. Appreciate the insight. We`ll be right back.

(COMMERCIAL BREAK)

KORNACKI: If you`ve ever traveled on a train between New York City and
Queens West or South, then chances are you`ve traveled in one of the only
two train tunnels connecting New York`s Penn Station to New Jersey. It
means there is only one tunnel in each direction for all of the Amtrak
service in this country that goes through New York.

Servicing many of the 260 million riders who traveled the northeast
corridor each year. Not to mention the New Jersey -- transit trains that
carry tens of thousands of commuters to and from the city every day.

To get all that traffic through a train travels each of these tunnels
roughly every 150 seconds, that`s once every two and a half minutes. And
when something, when anything goes wrong, when a train breaks down, when
there`s a signal problem, when there`s bad weather, when Amtrak tries to
add extra service around the holidays -- when anything like that happens,
it sets off a domino effect of delays which translate into valuable lost
hours and productivity, and enormous frustration for commuters.

But officials thought they had a solution to this -- build another tunnel.
Add more capacity to a limited train system more than 100 years old. That
was the idea. And so they started doing that. The project was called ARC,
it stood for Access to the Region`s Core. And in 2009 the work began.

New York was on board and New Jersey, too. New Jersey Senator Frank R.
Lautenberg who believed very strongly in transportation, he believed so
strongly in it that they named a new commuter rail hub in Secaucus, New
Jersey, after him. He was the project`s champion in Washington.

Now this was a huge undertaking. Senator Lautenberg had gotten the federal
government to kick in $3 billion toward the project. Far and away the
largest contribution the feds were making to any project in the country.
That money came from a competitive pool. That`s how much people liked this
project and by 2010 nearly $300 million of those federal funds had already
been spent to get moving on the tunnel.

Well, not everyone was behind it, though, because within 10 months of
taking office the new New Jersey governor shut the project down.

(BEGIN VIDEO CLIP)

GOV. CHRIS CHRISTIE (R), NEW JERSEY: This decision is final. There is no
opportunity for reconsideration of this decision on my part. I am done.
We are moving on.

(END VIDEO CLIP)

KORNACKI: That`s October 2010. Chris Christie is the governor. It`s his
first year and at that time, the head of New Jersey`s bus and transit
agency MJ Transit wrote a memo saying that the cost of the ARC tunnel had
gone up and that the additional cost would have to be absorbed by the state
of New Jersey.

You see the memo right here. It was signed off on by Port Authority brass,
too, that includes Christie`s then new appointee at the Port, deputy
executive director Bill Baroni. The memo recommended that Christie kill
the project and find, quote, "a sensible and affordable alternative."

Supporters of the tunnel including the Obama administration pleaded with
him to reconsider. But Christie stood firm. The economy was weak, money
was short. It was his job to make the hard choices like this. That`s what
he said, that`s what his argument was.

Here`s the press release his office put out when he officially canceled it.
"Christie administration enforces budget discipline and protects New Jersey
taxpayer dollars."

But that wasn`t the whole story. Because the feds demanded the $292
million back but it had already been spent. They demanded that it`d be
returned and Christie`s administration hired an expensive D.C. law firm
Patton Boggs to negotiate. New jersey ended up only paying back $95
million. Plus another million on top of that in legal fees. This was all
supposedly in the name of saving money.

And then when the Government Accountability Office issued a report about 18
months later, it completely destroyed Christie`s stated rationale. It
turned out that the costs were not exploding like he said they were and
that New Jersey was not on the hook for 70 percent of the overruns. The
actual number was a little more than 14 percent.

Now what`s of note about all of this is what Governor Christie did with
that money, the money that was supposed to be used to build that tunnel.
It eventually landed in the transportation trust fund, something that as a
candidate he pledged not to borrow from but to replenish.

(BEGIN VIDEO CLIP)

CHRISTIE: What we hear again from Mr. Daggett and from Governor Corzine
is, higher tolls, higher fees, higher taxes. The people of New Jersey are
suffering, they are suffocating under these taxes. We can`t do it. We
should do pay as you go on the transportation trust fund or current budget
funds.

(END VIDEO CLIP)

KORNACKI: Now Christie promised to make that transportation trust fund pay
as you go from current budget funds. He also said he would not be raising
any taxes. So after Christie was elected in 2009, because that fund was
now depleted, he asked the administration of outgoing Democrat Jon Corzine
to issue debt to replenish it. But it didn`t take long for that to start
running out, too, and Christie still had a problem.

Because as the "New York Times" and others have reported, he was taking
turnpike tolls, tolls that normally went into the transportation trust
fund, and he was using them to balance the overall state budget. So he
took the money of the state and set aside for the tunnel project that he`d
cancelled and he pitched it into the transportation trust fund instead.
With money in that fund -- with that money in that fund, the state then had
some cash to pursue infrastructure projects. But not as much cash as it
wanted.

And this is what leads us back to the Port Authority. We talked a lot
about the Port Authority of New York and New Jersey during the last few
weeks, first with the George Washington Bridge lane closures and then with
the revelation that it paid $75,000 for a redevelopment study in Hoboken
that was crucial to a project represented by the law firm of Port Authority
chairman David Samson.

Now you might know that the Port Authority is a bi-state agency that owns
and operates the airports, bridges and tunnels in the New York metropolitan
region. But it does more than that. Because the port right now is playing
a major role in how New Jersey is financing its transportation budget.

We looked at the numbers. Right now one of every $5 being spent on
transportation in the state of New Jersey comes from the Port Authority.
That`s almost $4.5 billion over the next five years.

If you want to really understand the relationship between Chris Christie
and David Samson, his top man at the Port Authority, you have to understand
how this happened and what the port has become. And that story starts with
the killing of the ARC tunnel in late 2010 because it was not just the
state of New Jersey and the federal government that were paying for the ARC
tunnel. The Port Authority itself had a bunch of money set aside for the
project.

A bunch of money as in $3 billion. $3 billion that could go instead to big
ticket infrastructure projects in New Jersey. Projects that Christie would
be able to claim credit for without raising taxes to bolster the
transportation trust fund. Christie publicly said he wanted some of that
money to go toward New Jersey projects and if he didn`t get his way he said
at the time he would hold up funds for the World Trade Center and for the
Tappan Zee Bridge replacements.

Those are two expensive projects, both entirely on the New York side. But
by early 2011 he didn`t have to make those threats because early that year
the Port Authority got a new chairman, David Samson. The former New Jersey
attorney general and the head of Christie`s transition team.

The month after Sampson joined the port and was elected chairman, the port
made an announcement. They were going to go along with Christie`s idea.
The port was going to cooperate with the state on what they called access
infrastructure enhancements projects. The port didn`t commit to a number
at that March 2011 meeting but the number that was kicked around at the
time was $1.8 billion.

Now that`s less than the $3 billion they were going to contribute to the
ARC tunnel but that was more than enough to let Christie fund the projects
he wanted to fund through 2016, the year everyone expected him to go off
and run for president.

Christie`s people bragged about how they were changing the way the state
funded its transportation projects. The Christie transportation capital
plan begins to reverses this irresponsible practice of borrowing over each
of the next five years. The Christie plan will increase cash contributions
used to fund transportation projects, while at the same time decreasing the
use of borrowing. That`s what they were saying.

It was highly unusual, though, for the Port Authority to spend money on
projects so far afield. Projects that didn`t in some way benefit both New
Jersey and New York in travel time -- in travel between them. So the
benefit in bond ratings agencies took notice. In 2011 they downgraded the
Port Authority`s bonds.

Moody`s said that the port had, quote, "a complex government structure that
makes the authority vulnerable to political interference that can result in
delays, revenue diversions for nonsystem assets and added costs for major
capital projects essential to the region."

But by then Samson, Baroni, David Wildstein and other Christie appointees
were in place at the port. The dollars were flowing to New Jersey. Four
major projects and state roads got under way, projects that add up to
almost $2.5 billion. Much more than the $1.8 billion that Christie
initially asked for but there`s more.

WNYC reports that in 2010 Christie sent a clear message that he would
withhold support for the World Trade Center reconstruction efforts unless
the port gave the go-ahead to the rebuilding of the Bayonne Bridge. It`s a
$1 billion project. Part of the price tag was also the port`s purchase of
an old U.S. army site in the city of Bayonne, the cost, $235 million,
enough to bail out the financially troubled city.

At the announcement of the project the head of one of New Jersey`s most
powerful unions, Ray Patino, the laborers, proclaimed his support for the
Republican governor of his state. Patino was also a Port Authority
commissioner. Christie renominated him in 2012 so he could stay in that
position. And the laborers today are one of the top 10 contributors to the
Republican Governors Associations that Christie heads. You see him right
up there.

There`s the Coke industries, Perry Homes, Wal-Mart, and the New Jersey
laborers. In 2012 Bill Baroni announced that the port would replace the
Path Stations, a commuter train station in Harrison. The cost of that
project $256 million.

He said that he worked across party lines with the Democratic mayor of that
town. Democratic mayor who went on to endorse Chris Christie in 2013 and
was quoted recently saying that even in the face of all the revelations of
the past few months he`d be happy to endorse Christie again right now.

The port was doing so much work in New Jersey that it didn`t have the cash
to do another New Jersey project, the $1.5 billion replacement of the
Goethals Bridge. For that the port turned to a public/private partnership.
The first and so far the only time the Port Authority had ever used that
kind of more expensive financing in its 92-year history.

To get that deal done, the New Jersey Economic Development Authority
authorized the biggest bond sale in state history, $457 million, all in tax
exempt bonds.

All of this work has happened since Christie came to office and according
to WNYC stocked the port with his political operatives. At the same time
commuters and travelers in the Port Authority bridges have seen their tolls
rise. Tolls are getting higher -- they`re getting high enough, excuse me,
that Moody`s, the same bond rating firm we mentioned earlier, said that the
port is at risk of losing drivers when gas prices go higher in the future.

It`s also meant an explosion in Port Authority debt. And all the while
it`s allowed Christie to promote himself as a fiscally responsible governor
who keeps campaign promises. Christie administration has dismissed the
idea the Port Authority has become New Jersey`s transportation piggy bank
as, quote, "an extremely odd presence."

They told WNYC, quote, "These are major Republican infrastructure projects
with lasting benefits not just to a particular town but the entire port
facility, New Jersey and New York`s economic well-being."

Still, the political benefits are clear when the dust settled from the ARC
tunnel, Christie went to New York to speak before the George W. Bush
Institute. It was an audition of sorts for him. And the sound bite from
that speech is him talking about the importance of being responsible and
saying no to projects that are too expensive to afford.

(BEGIN VIDEO CLIP)

CHRISTIE: I refuse to compromise my principles. So when they want to
build a tunnel to the basement of Macy`s and stick the New Jersey taxpayers
with a bill of $3 billion to $5 billion over, no matter how much the
administration yells and screams, you have to say no.

(END VIDEO CLIP)

KORNACKI: But consider this, in 2014 the New Jersey Department of
Transportation`s five-year capital plan lays out $21 billion in projects
but one out of every $5, almost $4.5 billion, is coming from the Port
Authority. And that doesn`t include the other half billion they`ve spent
on the Harrison Path Station and the Bayonne bailout.

So it`s easy to make these connections now. Sometimes someone in New
Jersey politics saw this coming, someone like Frank Lautenberg.

In April 2012 Lautenberg called Bill Baroni to testify in front of the
Senate Subcommittee and surface transportation and their exchange was
testy. Pressed by Lautenberg about toll increases and patronage at the
port, Baroni fired back by taking the senator to task for his use of a free
E-Z pass, it`s a standard perk given to former commissioners before being
taken away. Lautenberg was a former Port Authority commissioner.

Sitting right behind Baroni at that session was David Wildstein. Since
getting to the port Baroni and Wildstein had been said to be Christie`s
eyes and ears at the agency. WNYC reports they had masterminded a plan to
redirect ARC tunnel money to their state projects. Baroni`s performance at
that hearing got him a reprimand from Commerce Committee chairman senator
Jay Rockefeller who chided Baroni for, quote, "inappropriate discourse and
decorum."

Lautenberg died last year. But looking back on that hearing today you can
see that he had diagnosed a problem at the port. Patronage was making the
port turn away from its core mission. New projects were adding to the
agency`s debt and being paid for out of the pockets of ordinary travelers.

Christie`s fiscal management hasn`t been all budget gimmicks, gimmicks in
many cases that had been employed by previous New Jersey governors. He has
taken some proactive steps working with the -- this Democratic state
legislature to pay toward state pension obligations limiting the size of
arbitration awards, capping local property taxes.

Come to think of it some of these are some of the things that Dawn Zimmer,
the mayor of Hoboken, actually worked with him on.

(BEGIN VIDEO CLIP)

MAYOR DAWN ZIMMER (D), HOBOKEN, NEW JERSEY: I was the -- I think, the
first Democrat to stand behind him on the 2 percent tax cut. And I think
it`s done a lot some for Hoboken and some for the state. Health care
reform, arbitration reform. Arbitration reform definitely helped Hoboken
in our negotiations with the unions. It`s made a difference.

(END VIDEO CLIP)

KORNACKI: But the overall picture of the Christie budgeting process has
not been a pretty one. In late 2012 the bipartisan State Budget Task Force
labeled the way New Jersey handles its books as, quote, "structurally
unbalanced," saying that it does so in a way that pushes difficult budget
choices off to future years and is ultimately unsustainable.

The Port Authority is a bigger part of that problem than anyone realizes,
is one of the many reasons Governor Christie can`t afford to lose David
Samson as its chairman.

Well, here to discuss all this, we have back at the table, Jim McQueeny, a
former chief of staff and spokesman for Senator Frank Lautenberg and a
political host in New Jersey, we have New Jersey Congressman Frank Pallone,
Andrea Bernstein with WNYC News Radio, and Brian Murphy of Baroch College.

Andrea, we quoted your station, I`m guessing 623 time in that -- in that
introduction, so I`m going to start with you. But I think there`s a lot of
sort of dense information in there. But I think there`s something
fundamental about how the role that the Port Authority has played in the
New Jersey side in funding big infrastructure problems and big
transportation projects that is very different than the past. There should
have been -- a new precedent that`s been created here by the Christie
administration.

ANDREA BERNSTEIN, WNYC NEWS RADIO: Right. Governor Chris Christie had a
budget problem and when he came in, the transportation trust fund was
empty. There wasn`t almost a penny to spend on roads in New Jersey. So
they looked around and they saw this big pot of money in the Port Authority
and what I have sort of learned over the last few weeks is that immediately
when Wildstein and Baroni went to the authority, they started asking about
the money for the ARC tunnel. So this was many months before Christie came
and said I was shocked to learn of these cost overruns and I`m putting a
30-day moratorium on the project.

By the way, a little side note, David Samson who we`ve been talking about
so much was actually named by Christie, nominated, to head the Port
Authority just a few days before the moratorium was put on the ARC tunnel
funding. So this was a case where the Port Authority was going to solve
his budget headache and he was going to not have to raise the gas tax which
would have been terrible for someone looking at a Republican presidential
race sometime in the future.

Now I should say that Governor Cuomo of New York who also runs the Port
Authority did not take this aggressive stance at the time so it was the
Christie team was able to take advantage of this sort of vacuum at the Port
Authority and go and invest muscularly do this.

I mean governors have tried for decades to use the Port Authority to sort
of help them not have to spend money from the state budget but what was
different here was that Christie was able to do this in a situation where
there wasn`t strong pushback from New York and able to get a number of
these big and important projects.

I mean the ARC tunnel, this transit tunnel that was being built, that money
is now being used to rebuild the Pulaski Skyway in New Jersey, which takes
people out of the Holland Tunnel, a project that needed to be done. But
this transit infrastructure project which was supposed to spur long-term
economic development in New Jersey easing commutes that is problematic.

KORNACKI: And, Brian, you were very helpful to us in putting allot of the
research for this together. But it kind of gets to the story of the Port
Authority here, I think, is important to understand for people in terms of
we`re trying to figure out --crack the mystery of the George Washington
Bridge lane closure. At one level it seems so incredibly petty and we
don`t know -- we still don`t know the motive be and maybe, quote, "We`ll
hopefully figure that out."

But the fact that this was carried out by the Christie appointees at the
Port Authority, it`s telling you this story, understanding this and looking
at the George Washington Bridge thing, is telling us a little bit about how
the culture on the jersey side of the Port Authority has turned a little
bit more political in the last you know, three or four years.

And I mean, here`s an opportunity to have all these ribbon cuttings, to
have all these ground breakings on New Jersey projects and all you`ve got
to do is kill the ARC tunnel.

BRIAN MURPHY, BAROCH COLLEGE: Right. And something like David Samson
looks the Tywin Lannister of, like, New Jersey politics.

(LAUGHTER)

Why do you put people in positions of patronage, right? You do it to take
over something. You don`t do it just to give your friends jobs. You do it
to take over something. You don`t do it just to give your friends jobs.
You do it because there`s something that you want to do, there`s some kind
of policy outcome that you want. And now looking back on it, that New
Jersey transit memo on the ARC tunnel is one of the most disingenuous
official documents in the history of American infrastructure.

Right? It was clearly meant to blow this project at a critical moment by
misstating the outward -- like the forward costs on it. And they then
turned around and get the Port Authority to commit to all this -- to make
all open-ended commitments, right? You will not fine like in the Port`s
capital -- capital plan for the next 10 years. Precise numbers on exactly
how much the Christie administration has now put them on the hook for.

But when you look at the debt explosion, you look at the erosion on the
balance sheet, you look at what they had to do with the Goethals Bridge.
And looking back now it all begins to make sense in order this ARC Tunnel
piece comes in which we did not think we would be talking about.

KORNACKI: And, Jim, you knew Frank Lautenberg well. And this -- the ARC
Tunnel was going to be the -- in a way a legacy project of Frank
Lautenberg. We saw a lot of these problems.

JIM MCQUEENY, FORMER SR. LAUTENBERG CHIEF OF STAFF: He did. But, look,
this incident really, and the Port Authority involvement as well here,
really goes to how Christie has really big footed and buffaloed really
effectively the media on this. That ARC tunnel with all the stuff we went
through, all of that being true, was killed by two words, Macy`s basement.

The governor used his ability and it`s phenomenal to simply frame issues.
You know, the saying is things can be simple and most of the time they`re
simply wrong. But you know you`re looking at the case of a former
prosecutor who is bullishly framing media arguments and he got away from
what he did here with a lot of tangling of things thereafter.

Look, it was to avoid, as Andrea said, a gas tax. That was probably big at
the core of it and maybe even then thinking they were thinking in keeping
with the tax to Iowa, even then they might have been thinking that way.

But keep in mind, too, and I`m going to follow up what Brian said about
operatives, you know, you look at the tax that one of his predecessors, a
Democrat, Jim McGreevey, ran awhile from like it was a barn afire and it
was really reckless then because the gas prices were lower and the gas tax
put on top of it then would have hardly been felt and the transportation
trust fund would have been funded.

But that wasn`t a profile in coverage either here. So what Brian
mentioned, operatives, when they`re sent to the Port Authority here,
they`re sent with a Christie who is really framing a very powerful, like a
prosecuted media message, and it works. Macy`s basement.

Frank was -- Lautenberg was outfoxed and outflanked by media. The issue is
later clarified in GAO --

(CROSSTALK)

KORNACKI: Well, it`s -- it`s true because when the polling was taken after
Christie killed the project and he had all the arguments for why we need
the project, the polling in New Jersey still was like 51 percent said yes,
he should have done it and like 38 percent said, no, he shouldn`t. We`re
up against -- I want to get Congressman Pallone in this as soon as we come
back on the other side.

(COMMERCIAL BREAK)

KORNACKI: We`re back. Picking it up with Congressman Pallone. And you
were closed to Frank Lautenberg and this project was kind of dear to him.
I wonder if you could take us back in time to when Chris Christie was
canceling this project in 2010 and there was now an outcry from Senator
Lautenberg and for many others. Did you see at the time this was a
disingenuous argument that he was making or did you feel there was merit to
what he was saying?

REP. FRANK PALLONE (D), NEW JERSEY: No, absolutely. I took Senator
Lautenberg`s position be and I think the governor`s dishonesty in this
whole thing was incredible. I mean, understand that suggestion was being
made that there was an alternative. OK? Well, the alternative has never
materialized. They was -- there were billions of dollars that myself,
Senator Lautenberg, Senator Menendez, worked, you know, 15 years to get
this money. All right?

And most of it was being paid for, as you said, by the federal government
or by the Port Authority. The GAO reports said only 15 percent was being
paid for the state. So he wasn`t honest when he was saying look, this is
going to cost the state a lot more money or when he said that there was an
alternative. I mean, you understand, we`ve lost that money. The federal
dollars are gone. OK? That would have come to the state and created jobs
and basically made it possible to have a lot more trains to operate and
improve commerce between the states.

And it`s all gone. And we`re not going to recapture -- I mean, Steve, it
could take another 15 or 20 years if you wanted to build another tunnel.
And I know, you know, at the time there was talking about, we`ll have
another alternative that has not materialized and the jobs are lost, the
opportunity to freeze commerce to increase mass transit. All of that was
lost.

KORNACKI: And so these -- some of the projects we`re talking we documented
it in there in the introduction to this. The projects that were instead
paid for with this money.

PALLONE: Correct.

KORNACKI: You could say are worthy projects. Project that mean jobs.
Private -- but do -- when you get to the motive because I`m wondering we`ve
looked at this George Washington Bridge scandal. There was some kind of --
it seems like there was some kind of political motive. The endorsement
thing has been thrown out there. That doesn`t quite add up but we suspect
there`s some kind of political motive.

Do you see a political method and warning to have ribbon cuttings, have
these sort of ground breakings? Do you think that sort of what was
motivating it? I want to be able to go to these Democratic (INAUDIBLE), I
want to be able to go to Ray McDonough, this is the mayor of Harrison, New
Jersey, the Democratic mayor, give him a new path station, collect his
endorsement. Do you think that`s part of the picture?

PALLONE: I`m sure. Because after all the ARC Tunnel was something that he
hadn`t really worked on, that Governor Christie hasn`t worked on, and he
wasn`t really going to get much credit for. All these other project he
could do all those things publicly with the ribbon cutting and all that.
But what I just want to stress is how much we lost. I mean, the state just
lost millions of dollars that we have not recaptured and you know, that
report showed about the delays.

I mean, we have the snow in the last week or so. I was on a train going
back and forth to New York and there were all kinds of delays because of
the snow. So, you know, we`re facing another 10 or 15 years with major
delays not being able to get in and out of the city. The loss to commerce
and jobs is just incredible.

So, you know, the politics of the Port Authority and you know, basically
changing things, it`s not beneficial to the state.

(CROSSTALK)

MCQUEENY: Steve, one quick thing on here, to follow up the congressman. I
know the senator was very disturbed when the good governor came into
office. They had a discussion because this was, indeed, Frank Lautenberg`s
testament to his time in office. They had a meeting early on to sort of
reconcile. Listen, I, the senator, have to go out and get money and I was
out there grabbing money from other accounts, other senators, which creates
a big huge problem. Here is that guy from New Jersey again trying to
steal my money off my plate. Meaning the senators in this case, right?

So they went for reassurance that they could doing that because they were
short money. The senator at that time came back with the assurance that
they would basically still be with the program on this thing and wouldn`t
embarrass the senator. And then that policy decision, right or wrong, one
of the politic reason it was that you`re saying it for them.

They pulled the legs out from under them on that. And that was the thing,
a basic issue of political honesty among people working for New Jersey that
disturbed the senator the most.

KORNACKI: That and then when he went -- when Bill Baroni, the Christie
appointee at the Port Authority went down to testify in Washington. Bill
Baroni testified before Lautenberg`s committee and basically -- went out of
his way to try to humiliate Lautenberg.

BERNSTEIN: Breathtaking.

KORNACKI: Yes. And when you go back, holding up the E-Z pass.

BERNSTEIN: And he had this binder on his desk which seemed to be full of
dirt on Lautenberg.

UNIDENTIFIED MALE: Right.

BERNSTEIN: So every time Lautenberg asked him a tough question, he opened
it up and sort of said, well, you know, you didn`t pay your E-Z pass 284
times. One of those patronage employees was named Menendez. You know him.
What about this person connected to you? And it was all in this sort of
big binder. At the time we were just covering that hearing. And we
thought, wow, that`s very weird to see the --

(CROSSTALK)

KORNACKI: But it`s very -- it`s very so political, which is the question -
-

BERNSTEIN: For him to be attacking this octogenarian senator it just stuck
out like a sore thumb. Now we know from looking on all of this e-mails
this was their M.O., to embarrass people, to take out information that
might be damaging to them as a way to cow them.

(CROSSTALK)

MURPHY: Why do you put people there who don`t have a background in
transportation?

KORNACKI: That`s it.

MURPHY: But who do have a background as being very effective politician.

It shows us -- we`re saying is that the Port Authority has become
politicized. That`s somebody who`s down there giving a lot of answers that
are --

(CROSSTALK)

MCQUEENY: The Port Authority has always been political. And by the way
our team, New Jersey team, versus their team, the New York team --

(CROSSTALK)

KORNACKI: There`s always -- there`s always -- yes.

MCQUEENY: Are we just going to watch Port Authority guy arguing against
his own state senator that`s getting the money for the project? That was
more weird than the binder that they had.

KORNACKI: Right.

(CROSSTALK)

MURPHY: But (INAUDIBLE) beforehand you knew that day?

KORNACKI: Yes. And I`ve always said there`s a lot of -- there`s a lot of
gray in politics especially New Jersey politics. It could be tough to tell
what side you`re on. But sometimes it`s also very obvious when you`re --
when you`ve crossed the line, and I think that`s a theme that keeps coming
up in this -- anyway, I want to thank WNYC Andrea Bernstein, I thank Brian
Murphy and Jim McQueeny, my former News 12 colleague, and today, also
Congressman Frank Pallone.

No, he`s sticking around. I`m not thanking him yet. He`s staying. Stay,
Frank Pallone.

Today we have been discussing the state of New Jersey. Next we will turn
to the State of the Union. Stay with us.

(COMMERCIAL BREAK)

KORNACKI: It was this time last year that President Obama laid out a bold
agenda in his State of the Union address to Congress.

(BEGIN VIDEO CLIP)

BARACK OBAMA, PRESIDENT OF THE UNITED STATES: I urge this Congress to get
together, pursue a bipartisan market based solution to climate change.
Send me a comprehensive immigration reform bill in the next few months and
I will sign it right away and America will be better for it.

Let`s declare that in the wealthiest nation on earth no one who works full
time should have to live in poverty and raise the federal minimum wage to
$9 an hour.

(END VIDEO CLIP)

KORNACKI: As you may have noticed Congress didn`t accomplish any of that
last year. From what we`re hearing it looks like this year`s address could
be more of the same in terms of themes but with one key difference.

That`s ahead.

(COMMERCIAL BREAK)

KORNACKI: On Tuesday night President Obama will lay out the agenda he
wants to define his sixth year as president when he delivers his State of
the Union address. The White House has signaled that the president will
focus on economic mobility. It`s a message that Democrats are running hard
on heading into this year`s midterm election

The senior Obama adviser Dan Pfeifer send out a preview of the speech
yesterday that reinforced it. Quote, "Three words sum up the president`s
message on Tuesday night. Opportunity, action, and optimism. The core
idea is as American as they come. If you work hard and play by the rules,
you should have the opportunity to succeed."

" If you work hard and play by the rules," that`s a phrase Bill Clinton
coined more than 20 years ago. It`s a phrase that still communicates one
of the Democrats` strongest messages on economic fairness. Job creation,
raising the minimum wage, extending federal unemployment insurance
benefits, immigration reform, these are all proposals that Obama will
likely call on Congress to pass in the coming year.

But if you`re skeptical that Obama can get any of this past Republican
opposition, past filibusters in the Senate, past the Tea Party caucus in
the house. If not much can get through divided Congress, the president is
making it clear that this year he`s committed to wielding his executive
power to get things done.

(BEGIN VIDEO CLIP)

OBAMA: We are not just going to be waiting for a legislation in order to
make sure that we`re providing Americans the kind of help that they need.
I`ve got a pen and I`ve got a phone and I can use that pen to sign
executive orders and take executive actions and administrative actions that
is move the ball forward, and I`ve got a phone that allows me to convene
Americans from every walk a of life, nonprofits, businesses, the private
sector, universities, to try to bring more and more Americans together
around what I think is a unifying theme -- making sure that this is a
country where if you work hard you can make it.

(END VIDEO CLIP)

KORNACKI: Joining us now at the table is Lynn Sweet, she`s Washington
bureau chief with the "Chicago Sun Times," Congressman Frank Pallone is
still with us, Amanda Terkel, senior political reporter and politics
managing editor with "The Huffington Post," and Katrina Vanden Heuvel,
she`s the publisher and the editor of "The Nation."

Amanda, I`ll start with you. I`m just kind of curious what you make of
that statement we just heard from the president and this idea of, you know,
hey, I have the bully pulpit, I have some executive power here.

I mean, when you look at the sort of big ticket items everybody talks about
in Washington, talking about immigration, talking about the minimum wage,
how do you read that statement? Is that a statement of sort of desperation
because he hasn`t been able to get anything through this -- the Republican
House, passed the filibusters in the Senate, or is that a statement of some
resolve? Are there some real things he can do here if he faces in 2014 the
same thing he faced in 2013?

AMANDA TERKEL, HUFFINGTON POST: I think it`s a little bit of both. I
mean, President Obama has said in the past that he wanted to use more
executive actions. He has something called the we can`t wait initiative.
But what it seems like now is he`s going to step that up even more. And I
think for progressives, a lot of progressives feel like, it`s about time.
We`ve been wanting you to do this, because you`ve been wanting to cooperate
with Congress, which is -- which is fantastic.

But -- I mean, Mitch McConnell very early on said we want to defeat the
president. House Republicans have made clear they won`t cooperate with
him. So I think that this is -- this is smart by the president. What it
could to is perhaps have Congress can look at this and say well, we don`t
want President Obama simply doing all these executive actions so maybe we
should try to cooperate and try to pass something.

But with -- John Podesta from the Center for American Progress joining
President Obama on his team, he`s pushed for more executive actions from
Obama. So I think that you will see this and I think that it will be
exciting for a lot of progressives.

KORNACKI: Yes, that was -- that was interesting. The recent announcement
John Podesta coming in and he`s basically going to serve as sort of the
head of what we can do on executive actions like on climate change. That
was an interesting change.

Katrina, as you look at this speech, the idea Amanda just put out there, do
you think the threat of more vigorous executive action is enough to jar
Republicans at all towards a little more cooperation? Do you think there`s
any potential there?

KATRINA VANDEN HEUVEL, THE NATION: You know, by the way, there is --
there`s already cooperation. I mean, my column in the "Washington Post"
next week is about transpartisanship. You have a Tea Party working with
John Conyers, the most liberal member of Congress, to push legislation that
curb the NSA.

KORNACKI: Right.

VANDEN HEUVEL: You have David Vitter working with Sherrod Brown, two banks
to fail, and Elizabeth Warren, the great crusader against Wall Street
excesses working with John McCain. But I think this speech needs to be
viewed against the backdrop of a progressive resurgence this past year and
just that that has built up whether it`s people on the streets, fast food
workers, whether it`s the progressives in the Senate saying, enough.

We`re not just going to step back and defend programs that have made this
country a more civilized one like Social Security. We`re going to expand
it. So I think the president is being moved by his constituency that has
waited too long and is saying we can`t wait. So let us move forward.

KORNACKI: But so -- Lynn, to me I`m looking at the calendar and there`s
the speech this week and we can expect the president to call for probably
raising the minimum wage and last year I think the call was for $9, now
there`s a little bit more momentum. It`s going to be $10.10, it`s going to
be indexing. We can expect the call for, you know, comprehensive
immigration reform that got through the Senate last year, absolutely died
in the House.

The key thing that I`m kind of looking at is a few days after the speech,
the House Republicans will have their retreat and they will supposedly sort
of come up with their plan for the year. Do you think that the -- the
House Republicans who have stymied so much of what Obama has tried to do,
do you think their experience in 2013 with the shutdown, with the low poll
numbers, with all that -- do you think anything might come out of that
retreat that would change their approach in 2014 at all?

LYNN SWEET, CHICAGO SUN TIMES: No. And take note that why they have their
retreat Obama after the State of the Union is going to go to Prince
George`s County, Pittsburgh, Nashville, and Milwaukee. So he will continue
to have the upper hand if you just talk about plain media exposure to
amplify what was in this speech.

I think -- I think the -- yes, the House, as everyone on the panel knows
and as reviewers know, it`s leadership driven. So I would think what a
retreat like this might be more is to find consensus on what leadership
wants to do or for leadership to find out where they might go tread
carefully then to have a response.

And, you know, just one quick thing. This quest to find common ground on
the mega issues, well, I see nothing changing and in five years the Obama
team hasn`t found any way to change things, which is why he`s talking on
this pen and pencil stuff, I mean, this is the president saying, I want to
convene. I want nonprofits and universities. Whoa. I mean --

KORNACKI: But when you --

(CROSSTALK)

KORNACKI: So when you talk about like -- when you talk about these big
ticket things, take immigration, Congressman, as an example, you did have
the bipartisan thing that got through the Senate and it`s absolutely died
in the House.

Your conversations in the House, with Republicans in the House, with your
own party in the House, is there any optimism that the kind of immigration
bill that made it through the Senate last year, this real comprehensive
passed decision bill, is there any optimism that that has a chance in 2014?

PALLONE: I am going to be the optimist because I really do think now that
there is a bit of a consensus that we have to move on immigration reform as
you said. As you know, the speaker, Speaker Boehner, keeps talking about,
you know, an alternative to the Senate bill. Unfortunately it doesn`t have
a pathway to citizenship which is I think where we need to go. But at
least they`re talking, you know, a little more comprehensively about how
they have to address immigration reform.

KORNACKI: I mean, there could ultimately be accessible to Democrats short
of the path to citizenship but with legal status?

PALLONE: No, I think they have to have a pathway to citizenship. But I
think that the Republicans, they ultimately get there and it may not be as
comprehensive as we want. But if it has a pathway to citizenship, that
would be progress.

The other thing I wanted to say, you know, this whole concept of the loss
of the American dream, you know, the fact that there isn`t an opportunity
anymore if you work hard and you do the right thing to get ahead, and to do
well and find a job, I think that the Republicans are concerned about that
as well. They may not go along with what we want to do which is increase
the minimum wage, have unemployment compensation, you know, have a job
creation bill.

But I think there is this -- they understand that the middle class is
shrinking and that something needs to be done with this income inequality -
-

(CROSSTALK)

KORNACKI: This could be a big theme so we`re going to pick it up right on
the other side.

(COMMERCIAL BREAK)

KORNACKI: So we just started to talk about, too, how economic mobility is
going to be a major theme in the speech.

And Katrina, I know you have something to say there.

VANDEN HEUVEL: Well, I mean, first of all, the idea of tackling inequality
is a right versus left issue, it`s ridiculous. It`s right versus wrong.
But what the president is going to speak to is what`s going on in this
country. People in motion seeking a system that works for working people
and isn`t rigged against them. Thirteen states, by the way, in 2014
increased the minimum wage so there`s progress going on even as a Congress
is gridlocked.

So I think we`re going to hear a lot and I do think that the executive
action piece, if used wisely and with consistency, is very important and he
could give edge to this speech, launch a good jobs initiative. There are
two million people working in this country for the government, for
contractors. Those companies should go high road and give their workers a
good minimum wage, a decent living, and pay attention to labor laws.

(CROSSTALK)

KORNACKI: So where does it -- I mean, look, increasing the minimum wage is
not the be all and end all of economic mobility.

VANDEN HEUVEL: No.

KORNACKI: You need equality. But from a policy standpoint it seems like
right now I`m looking at this and saying where is the Republican support
for raising the minimum wage or where could it come from? Can he do
something --

(CROSSTALK)

SWEET: No, I think --

KORNACKI: To bring that --

SWEET: It`s not -- and you know, one of the reasons Democrats have a lot
of support from the trade unions is that a lot of federal state and local
projects do pay good union wages which is why within the union movement
there`s a schism sometimes between the public sector unions and the trade
unions.

But a quick point if I may on income inequality, I think Democrats have to
be careful about not igniting or exacerbating, in a sense, a class warfare.
You know, Obama has talked about so much in these areas about helping the
middle class. If you go to income inequality, you know, I think that there
has to be done with some (INAUDIBLE) and sensitivity to the middle class
not taking this as the 1 percent on the bottom fighting the 1 percent --

KORNACKI: Well, I guess -- I guess the question then, Amanda, is --

SWEET: Or the many percent.

KORNACKI: The climate -- the climate we`re in, though, right now, has it
changed our politics where a message like Lynn is talking about given the -
- really lack of a strong recovery since the meltdown in 2008 and given
that the real gains had been at the very, very top 1 percent even within
the top 1 percent. Has that created a different climate the middle class
maybe is more receptive to this kind of mess?

TERKEL: Well, I mean, I think it has created that sort of 99 percent, 1
percent climate where you`re hearing kind of income inequality in the
middle class -- many people in the middle class are looking at why I don`t
have the same opportunity that my parents did.

And, you know, President Obama in the State of the Union focusing on this,
this will help set the sort of -- the gender of the tone, I guess, as
Democrats campaign more in 2014. Now Republicans still haven`t quite
figured out how to talk about this. You had Eric Cantor on the floor
recently saying that we are concerned about employment, not unemployment,
that`s great, but there are a lot of people unemployed who need some help
right now.

So you can`t just focus on employment. You have to help those people who
are unemployed. And that`s -- Republicans are still figuring out how to
deal with this.

VANDEN HEUVEL: I was going to say, Elizabeth Warren was in the city in her
first ever public appears just a few days ago. And she speaks about a
system that isn`t working for working people. She speaks about how 95
percent of the economic gains since the great recession have gone to the
top 1 percent. She speaks about student debt. She speaks about
opportunity. She speaks about expanding retirement security.

That is not class warfare. And there is a way to speak to this, which is
going to affect -- and people will connect to it in their guts, because the
bottom line is how do you improve the condition of people`s lives?

(CROSSTALK)

TERKEL: That`s what politics should be about.

KORNACKI: Very quickly.

SWEET: Very quick, if you`re looking for where you could find common
ground, I think the White House Republicans pick and issue like student
threat, it crosses ideology, everyone`s got kids, colleges are expensive.
Deal with some -- maybe some bite-sized chunks, get something done.

KORNACKI: All right. We are two days away from the State of the Union.
We will all be watching. One person here, a front-row seat, or close to a
front-row seat. But we will be right back with some final thoughts from
our panel for the week ahead.

(COMMERCIAL BREAK)

KORNACKI: All right. We are really short on time. This is the lightning
round edition. What do our guests think we should know for the week ahead?

Amanda, we`ll start with you.

TERKEL: Well, on the coming week, expect a bipartisan group of senators to
renew a push saying that Congress should get to authorize whether U.S.
troops remain in Afghanistan beyond 2014.

KORNACKI: All right. Katrina?

VANDEN HEUVEL: OK. This coming week is the 50th anniversary of the great
satire Dr. Strangelove, and you know what? Everything in that satire was
true. Watch it again.

(LAUGHTER)

KORNACKI: It`s a great movie. Lynn?

SWEET: On the 29th and 30th, watch for First Lady Michelle Obama, fresh
off her 50th birthday, to hit Los Angeles and San Francisco for a round of
big-money fundraising.

KORNACKI: That`s where the money is. And Congressman Pallone?

PALLONE: Well, I`ll be the pessimist, because even instead of talking
about jobs, the House Republican leadership is bringing up an abortion bill
this week, about, you know, not financing abortions, which isn`t even an
issue under Obamacare, but that`s what they`re focusing on. So
unfortunately we`re not moving forward. They`re still talking about
abortion instead of creating jobs.

KORNACKI: All right. They say there`s no time for me. I`ll go right to
the prompter.

I want thank Amanda Terkel, Katrina Vanden Heuvel, Lynn Sweet, Congressman
Frank Pallone, thank you all for getting up this morning.

Thank you for joining us. Coming up next, Melissa Harris-Perry. On
today`s "MHP," how candidates build their narratives only to see them
picked apart.

That is ahead in "Nerdland," and we will see you right back here next week
on UP.

(COMMERCIAL BREAK)


THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY
BE UPDATED.
END

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